General Assessment of Financial Condition of Agriculture in Kazakhstan. Dissertation

1. Introduction……………………………………………………………………………………3
1.1 Background………………………………………………………………………………….3
1.2 Objectives……………………………………………………………………………………4
2. Literature Review…………………………………………………………………………….5
2.1 Theoretical Aspects of Revenue in Agricultural Companies…………………………..5
2.2 Cash Flow Management…………………………………………………………………..6
2.3 Structure and Features of Circulation of Fixed and Current Capital in Agriculture….8
2.4 Overview of the financial sector………………………………………………………….14
2.5 Description of the Agriculture Industry and Conditions in Kazakhstan………………17
3. Research Methodology…………………………………………………………………….25
3.1 Aim of Research…………………………………………………………………………..25
3.2 Research Population and Procedures…………………………………………………. 25
3.2.1 Data collection………………………………………………………………….. 25
3.2.2 Methodology of evaluation……………………………………………………..26
3.3 Validity and Reliability…………………………………………………………………….26
4. Data Analysis………………………………………………………………………………..27
4.1 General Assessment of Financial Condition of Agriculture in Kazakhstan………….27
4.2 Financial support of Agriculture by the State…………………………………………..36
5. Conclusion…………………………………………………………………………………..39
6. List of references……………………………………………………………………………41
7. Appendices

CHAPTER 1.
INTRODUCTION
1.1 BACKGROUND
The rоle of аgriсulture in а соuntry’s оr rеgion’s economics shows its structure and development level. As activities of agriculture, we use a percentage engaged in the agriculture among the economically active population, and the unit weight of agriculture in the GDP. These activities are common enough in most developing countries, where more than half of the economically active population is engaged in agriculture. Agriculture in these countries is extensive, that is the growth of production is achieved by the extension of planted area, increase in head of cattle, and the number of people engaged in agriculture (KazAgro, 2011).
The highest level of agriculture is in developed countries Europe and North America, which have entered the postindustrial stage. Only 2-6% of the economically active population is engaged in agriculture there. These countries already experienced “the green revolution” in the middle of 20th century. Agriculture is characterized by scientific grounded structure, increase in productivity, use of innovations, agricultural machinery systems, pesticides and mineral fertilizers, genetic engineering and bioengineering, robotics and electronics. That is the agriculture in these countries that is intensively developing (Popov, n.d.).
Such progressive changes are occurring also in countries that are of industrial nature, but the level of intensity is still too low there, and the portion of population engaged in agriculture is higher than in postindustrial countries.
In developed countries there is the crisis of overproduction, and in agricultural ones, on the contrary, one of the acute problems is food problem (the problem of undernourishment and starvation).
Agriculture is the most important sector of the national economy of Kazakhstan and the core of the country's agro-industrial complex. Agriculture place a very important role in Kazakhstan. Agricultural concerns accounted 38% of GDP (KazAgro, 2010). In general, agricultural activities used only sixteen percent of the workforce of the country. Land area of Kazakhstan is two hundred and twenty two and a half million hectares. Eighty-two percent of the total land area is used for agriculture. More than thirty-six million hectares are of arable land and Kazakhstan ranked as sixth in size in the world. Production of cereals and legumes per capita per year is 1702 pounds, which counts as the third largest in the world (KazAgroFinance, 2011). Output of wheat in Kazakhstan is the second largest amount in the world, after Canada. Kazakhstan grows very good quality bread wheat. Export of grain in the former Soviet Union was provided only by Kazakhstan.
However, Kazakhstan has one of the world's lowest average yields of cereals and other crops, and livestock productivity (Statistic agency of Kazakhstan, n.d.).
1.2 OBJECTIVES
In order to find the ways of solving financial problems in the agricultural sector in Kazakhstan the hypothesis for this paper will be the following: the necessity of establishing an agro-bank in Kazakhstan for maintaining agricultural enterprises.
To prove the hypothesis the main areas of research are considered as follows:
• To overview the main principles and specific features of the agricultural sphere in Kazakhstan;
• To define the main financial problems in this particular sphere in Kazakhstan;
• To compare conditions of agricultural loans in Kazakhstan and Russia;
• To determine the optimal cash flow system to enhance financial stability and the solvency of agricultural companies.
The main goal of the dissertation is to determine the optimal cash flow system to enhance financial stability and solvency of agricultural companies.

CHAPTER 5.
CONCLUSIONS
After having reviewed the literature on the problem of financing of agricultural sector and analyzing the data collected, the conclusions were made as follows.
The main reasons for the relatively slow development of the agricultural sector in Republic of Kazakhstan are the low rates of structural and technological modernization of the sector, updating of fixed assets and the reproduction of natural ecological potential; unfavorable general conditions of agriculture functioning. In particular, they are: unsatisfactory level of market infrastructure development, which impedes the access of agricultural producers to financial, material, technical and information resources market, lack of qualified personnel, because of the low life standard in the countryside.
To solve these problems financing is required. But as far as we could see there are certain problems with financing of agricultural sector in Kazakhstan. The state gives subsides and try to support farms and agricultural enterprises, but the amount, given by the sate is not enough to meet all the costs needed.
So it is important to have an agrobank that will provide loans to farmers. An agrobank should deal only with agricultural enterprises and farmers. With commercial banks it looks like that farmers take loans with high interest rates, and such loans are difficult to pay off. More favorable credit interest of an agrobank will help agricultural producers not to burden their production but to develop and improve it. A bank should be engaged in long-term lending by lending at lower per annum interest rate and short-term lending with higher per annum interest rates. It is these preferential interest rates on loans that will be the advantage of an agrobank. Such institution should help farmers to renovate the fixed assets such as buildings, structures, combine harvesters, farm machinery, tractors and refrigeration equipment; to purchase cattle, poultry, and so on. Due to the operation of a bank, there will be opportunity of a more progressive development of agricultural activities in the country.
According to the objectives put in the beginning of the research, the work:
- overviewed the main principles and specific features of agricultural sphere in Kazakhstan;
- defined the main financial problems in this particular sphere in Kazakhstan;
- determined the optimal cash flow system to enhance financial stability and solvency of agricultural companies.
After the analysis, carried out and the objectives met, it can be said that the goal has been reached and the hypothesis proved.

CHAPTER 5.
LIST OF REFRENCIES
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http://cpa.utk.edu/pdffiles/adc37.pdf (Accessed: 01 August 2012)
2. Analytic service of rating agency (2011). Analysis of livestock sector. Almaty: s.n.
3. Burdina.E. and Kovalev V. (2004). Statistical analysis of the status and trends of the banking system. Problems of Statistics 3 (5), pp. 33-39.
4. Embassy of Kazakhstan to the USA and Canada (2012). [online] Business and economy. Agriculture. Available at http://prosites-kazakhembus.homestead.com/agriculture.html. (Accessed: 01 August 2012)
5. Embassy of the Republic of Kazakhstan (2012). [online] Available at
http://www.kazakhembus.com/page/agricultural-sector. (Accessed: 03 August 2012)
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9. Government of the republic of Kazakhstan (2006). Project of the development of export potential cattle meat of the Republic of Kazakhstan. Available at http://ru.government.kz/resources/docs/doc23. (Accessed: 24 July 2012)
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12. KazAgro, (2011). Annual report. Available at :
http://www.kazagro.kz/ru/about/financial-politics. (Accessed: 22 August 2012)
13. KazAgroFinance, (2011). Development Strategy for 2011-2020. [online] Available at: http://www.kaf.kz/en/about/development_strategy/ (Accessed: 23 August 2012)
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6. APPENDICES
Appendix 1.
BOX 1
Natural conditions in northern
Kazakhstan
• Fertile chernozem and chestnut soils
with good water retention, high soil organic
matter (between 3 and 9 percent) and
nutrient and phosphorus content.
• Precipitation varies from 190 to 320
mm (130 to 200 mm rainfall in summer; 60
to 120 mm snow in winter).
• Vegetative growing period from mid-May until mid-September with a maximum
of only 120 frost-free days.
• The average temperature is 20C in
summer; -20 ºC in winter.
Source: FAO 2002

Appendix 2.
TABLE 1
SUPPORT FOR MAJOR AGRICULTURAL PRODUCTS, 2000-4
(as a percentage of farmgate revenue)
Commodity 2000 2001 2002 2003 2004
Wheat - 1 (22) - 8 (27) 4 (22) - 2 (23) 19 (21)
Sugar -6 (3) -3 (4) 17 (4) 21 (4) 17 (4)
Potatoes 8 (4) 4 (2) 4 (3) 3 (5) 11 (2)
Sub-total crops 1 (41) -7 (44) 6 (40) 5 (44) 14 (38)
Milk -2 (16) -3 (14) 0 (14) -4 (14) 8 (14)
Beef and veal -61 (11) -3 (9) -1 (10) 26 (11) 40 (11)
Pig meat 39 (9) 32 (8) 28 (5) 45 (5) 37 (5)
Sub-total livestock 10 (41) 6 (36) 4 (38) 15 (37) 24 (39)
Average PSE – all commodities -5 -1 4 15 24
Coverage (% of farm output) 65 64 58 62 57
Source: The estimates for wheat 2000-3 and for sugar, potatoes, milk, beef and pork are from the revised Agricultural Policy Assessment (September 2006).

Appendix 3.
TABLE 2
PREDICTING ACCOUNTS OF DEMANDS IN FINANCING
№ Activity 2011 2012 2013 2014 2015 2016
1 Crediting on creation of breeding enterprises, mln tenge 8 890 8 890 18 189 19 739 18 189 73 896
Objects, heads capacity 8 080 8 080 16 160 18 180 20 200 70 700
2 Crediting on creation of fattening bases, mln. tenge 3 150 4 500 6 750 6 750 5 850 27 000
Objects, fattening place capacity 15 350 21 940 32 910 32 910 28 590 131 700
3 Crediting of farms on development of livestock, mln tenge 6 432 6 960 6 960 4 176 4 089 28 617
Objects, heads capacity 40 000 40 000 40 000 24 000 23 500 167 500
Total 18 472 20 350 31 899 30 665 28 128 129 513
Source: “Project of the development of export potential cattle meat of the Republic of Kazakhstan” (http://ru.government.kz/resources/docs/doc23)